When it comes to planning for retirement, Roth conversions are a hot topic—and for good reason. They can be a powerful tool in your financial toolbox, but like any tool, they’re best used when you know what you’re doing.

So, what is a Roth conversion? It is the process of transferring money from a traditional IRA or 401(k) (where you'll pay taxes when you withdraw funds) into a Roth IRA, where your money grows tax-free. Sounds pretty good, right? But there’s a catch: you’ll have to pay taxes on the amount you convert in the year you do it. Think of it like a financial “pay now, save later” strategy.

A Roth conversion can be a great way to lock in tax-free income for the future, but it’s not a one-size-fits-all solution. The best strategy often involves converting a little at a time over several years to stay in a lower tax bracket.

Before you dive in, talk to a financial planner and a tax professional. They’ll help you crunch the numbers, weigh the pros and cons, and decide if a Roth conversion is the right move for your unique situation. After all, financial planning is all about enjoying life, keeping more in your pocket and paying less to Uncle Sam!

Disclosure:

There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Gordon Haas is a Financial Planner with and offers securities and investment advisory services through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Haas Wealth Strategies.

The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.

The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal. Individual tax and legal matters should be discussed with your tax or legal professional. Gordon Haas is not registered as a broker-dealer or investment advisor.